Leaks reveal secrets of the rich who hide cash offshore

Exclusive: Offshore financial industry leak exposes identities of 1,000s of holders of anonymous wealth from around the world

• David Leigh
• The Guardian, Wednesday 3 April 2013 23.59 BST

The British Virgin Islands, the world's leading offshore haven used by an array of government officials and rich families to hide their wealth. Photograph: Duncan Mcnicol/Getty Images

Millions of internal records have leaked from Britain's offshore financial industry, exposing for the first time the identities of thousands of holders of anonymous wealth from around the world, from presidents to plutocrats, the daughter of a notorious dictator and a British millionaire accused of concealing assets from his ex-wife.

The leak of 2m emails and other documents, mainly from the offshore haven of the British Virgin Islands (BVI), has the potential to cause a seismic shock worldwide to the booming offshore trade, with a former chief economist at McKinsey estimating that wealthy individuals may have as much as $32tn (£21tn) stashed in overseas havens.

In France, Jean-Jacques Augier, President François Hollande's campaign co-treasurer and close friend, has been forced to publicly identify his Chinese business partner. It emerges as Hollande is mired in financial scandal because his former budget minister concealed a Swiss bank account for 20 years and repeatedly lied about it.

In Mongolia, the country's former finance minister and deputy speaker of its parliament says he may have to resign from politics as a result of this investigation.

But the two can now be named for the first time because of their use of companies in offshore havens, particularly in the British Virgin Islands, where owners' identities normally remain secret.

The names have been unearthed in a novel project by the Washington-based International Consortium of Investigative Journalists [ICIJ], in collaboration with the Guardian and other international media, who are jointly publishing their research results this week.

The naming project may be extremely damaging for confidence among the world's wealthiest people, no longer certain that the size of their fortunes remains hidden from governments and from their neighbours.

BVI's clients include Scot Young, a millionaire associate of deceased oligarch Boris Berezovsky. Dundee-born Young is in jail for contempt of court for concealing assets from his ex-wife.

Young's lawyer, to whom he signed over power of attorney, appears to control interests in a BVI company that owns a potentially lucrative Moscow development with a value estimated at $100m.

Another is jailed fraudster Achilleas Kallakis. He used fake BVI companies to obtain a record-breaking £750m in property loans from reckless British and Irish banks.

As well as Britons hiding wealth offshore, an extraordinary array of government officials and rich families across the world are identified, from Canada, the US, India, Pakistan, Indonesia, Iran, China, Thailand and former communist states.

The data seen by the Guardian shows that their secret companies are based mainly in the British Virgin Islands.

Sample offshore owners named in the leaked files include:

• Jean-Jacques Augier, François Hollande's 2012 election campaign co-treasurer, launched a Caymans-based distributor in China with a 25% partner in a BVI company. Augier says his partner was Xi Shu, a Chinese businessman.

• Mongolia's former finance minister. Bayartsogt Sangajav set up "Legend Plus Capital Ltd" with a Swiss bank account, while he served as finance minister of the impoverished state from 2008 to 2012. He says it was "a mistake" not to declare it, and says "I probably should consider resigning from my position".

• The president of Azerbaijan and his family. A local construction magnate, Hassan Gozal, controls entities set up in the names of President Ilham Aliyev's two daughters.

• The wife of Russia's deputy prime minister. Olga Shuvalova's husband, businessman and politician Igor Shuvalov, has denied allegations of wrongdoing about her offshore interests.

•A senator's husband in Canada. Lawyer Tony Merchant deposited more than US$800,000 into an offshore trust.

He paid fees in cash and ordered written communication to be "kept to a minimum".

• A dictator's child in the Philippines: Maria Imelda Marcos Manotoc, a provincial governor, is the eldest daughter of former President Ferdinand Marcos, notorious for corruption.

• Spain's wealthiest art collector, Baroness Carmen Thyssen-Bornemisza, a former beauty queen and widow of a Thyssen steel billionaire, who uses offshore entities to buy pictures.

• US: Offshore clients include Denise Rich, ex-wife of notorious oil trader Marc Rich, who was controversially pardoned by President Clinton on tax evasion charges. She put $144m into the Dry Trust, set up in the Cook Islands.

It is estimated that more than $20tn acquired by wealthy individuals could lie in offshore accounts. The UK-controlled BVI has been the most successful among the mushrooming secrecy havens that cater for them.

The Caribbean micro-state has incorporated more than a million such offshore entitiessince it began marketing itself worldwide in the 1980s. Owners' true identities are never revealed.

Even the island's official financial regulators normally have no idea who is behind them.

The British Foreign Office depends on the BVI's company licensing revenue to subsidise this residual outpost of empire, while lawyers and accountants in the City of London benefit from a lucrative trade as intermediaries.

They claim the tax-free offshore companies provide legitimate privacy. Neil Smith, the financial secretary of the autonomous local administration in the BVI's capital Tortola, told the Guardian it was very inaccurate to claim the island "harbours the ethically challenged".

He said: "Our legislation provides a more hostile environment for illegality than most jurisdictions".

Smith added that in "rare instances …where the BVI was implicated in illegal activity by association or otherwise, we responded swiftly and decisively".

The Guardian and ICIJ's Offshore Secrets series last year exposed how UK property empires have been built up by, among others, Russian oligarchs, fraudsters and tax avoiders, using BVI companies behind a screen of sham directors.

Such so-called "nominees", Britons giving far-flung addresses on Nevis in the Caribbean, Dubai or the Seychelles, are simply renting out their names for the real owners to hide behind.

The whistleblowing group WikiLeaks caused a storm of controversy in 2010 when it was able to download almost two gigabytes of leaked US military and diplomatic files.

The new BVI data, by contrast, contains more than 200 gigabytes, covering more than a decade of financial information about the global transactions of BVI private incorporation agencies. It also includes data on their offshoots in Singapore, Hong Kong and the Cook Islands in the Pacific.

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Profiles of leading secret account holders

Leading figures across the globe with secret overseas entities

• David Leigh
• guardian.co.uk, Wednesday 3 April 2013 23.09 BST

Mongolia

Name: Bayartsogt Sangajav

Offshore company: Legend Plus Capital Limited

One of Mongolia's most senior politicians says he is considering resigning from office after being confronted with evidence of his offshore entity and secret Swiss bank account.

"I shouldn't have opened that account. I should have included the company in my declarations," Bayartsogt Sangajav told the International Consortium of Investigative Journalists (ICIJ). "I don't worry about my reputation. I worry about my family. I probably should consider resigning from my position."

Bayartsogt, who says his account at one point contained more than $1 million, became his country's finance minister in September 2008, a position he held until a cabinet reshuffle in August 2012. He is now the deputy speaker of Parliament.

During those years he attended international meetings and served as governor of the Asian Development Bank and the European Bank of Reconstruction, pushing the case for his poor nation to receive foreign development assistance and investment.

Canada

Name: Tony Merchant

Offshore Company: Merchant (2000) US Inc Trust

Colourful lawyer and former politician, married to Liberal party senator Pana Merchant. Known for challenges to the Canadian revenue agency over his tax payments . He has also been disciplined by the Law Society for "conduct unbecoming ." In 1998, launched Cook Islands trust with deposit of more than US$800,000 as settlor and initially as beneficiary. Sent fee payments in cash envelopes: the agents noted "All communications regarding this trust is to be kept to a minimum…Do not ever send faxes cos he will have a stroke about it"

Comment: Declines to comment

France

Name: Jean-Jacques Augier

Offshore company: International Bookstores Ltd [IBL]

Publisher and Sinologist. Campaign treasurer of François Hollande for the 2012 presidential elections. They studied together at the prestigious National School of Management (ENA). Chief Executive of Eurane SA. Made large publishing investment in China 2005. Caymans-registered entity IBL, set up with 25% shareholding granted to BVI company Sinolinks Transworld Investment Consultancy, and 2.5% shareholding to a Hong Kong entity Capital Concord Developments Ltd.

Comment: He says partner in the offshore firm was Xi Shu, a businessman and a member of the Chinese People's Political Consultative Conference, a political advisory body.

Russia

Name: Olga Shuvalova
Offshore companies: Plato Management & other BVI companies owned by Severin Enterprises Inc

Wife of Igor Shuvalov, a businessman and politician close to Putin , first deputy prime minister since 2008. In 2007, she is recorded as owning Severin Enterprises , set up via Moscow agency Amond & Smith. The dealings of another of its subsidiaries, Bahamas-registered Sevenkey Ltd, were detailed in a 2011 investigative article in Barron's, which tied the company to her husband, who has denied wrongdoing.

Comment: declines to comment

US

Name: Denise Rich
Offshore company: The Dry Trust

Among nearly 4,000 American names is Denise Rich, a songwriter whose ex-husband, the oil trader Marc Rich, was pardoned by President Clinton as he left office in 2001, over tax evasion and racketeering charges. A Congressional investigation found that Rich, who raised millions of dollars for Democratic politicians, helped promote the pardon. She had $144 million in April 2006 in the trust in the Cook Islands plus a yacht called the Lady Joy, where Rich often entertained celebrities and raised money for charity.

Comment: Rich, who gave up her U.S. citizenship in 2011 and now maintains citizenship in Austria, did not reply to questions about her offshore trust

Azerbaijan

Name: President Ilham Aliyev and family

Offshore Companies: Arbor Investments; LaBelleza Holdings; Harvard Management; Rosamund International

Three BVI entities set up in 2008 in the names of the president's daughters, Arzu and Leyla,. They list as a director wealthy local businessman, Hassan Gozal. His construction company has won major contracts in Azerbaijan. Another BVI entity set up in 2003, lists the president and his wife Mehriban as owners.

Comment: Those involved decline to comment

Spain

Name: Baroness Carmen Thyssen-Bornemisza
Offshore Companies: Sargasso Trustees Ltd (1996-2004) and Nautilus Ltd (1994), both registered in the Cook Is. Her son, Borja, also has some of the shares

Former beauty queen, Spanish-based art collector and widow of a billionaire Thyssen steel heir, she used the offshore vehicles to buy art, including Van Gogh's "Watermill at Gennep" from Sotheby and Christies in London.

Her lawyer acknowledged that she gains tax benefits by holding ownership of her art offshore, but stressed that she primarily seeks "maximum flexibility" to move art from country to country

Comment: Her lawyer acknowledged tax benefits from owning art offshore, but stressed that she primarily seeks "maximum flexibility" to move art from country to country

Philippines

Name: Maria Imelda Marcos Manotoc
Offshore company: Sintra Trust [BVI]

Late president Marcos' eldest daughter, now a provincial governor, is listed in 2005 in the BVI as the "investment advisor" and beneficiary of the Sintra Trust, set up by her associate, businessman Mark Chua of Singapore. She does not mention the trust in her Philippines declarations of financial interests

Comment: She declined to answer a series of questions from local journalists about the trust

• It is not suggested that any of those listed here have behaved unlawfully. Offshore entities can be held legitimately: the only aspect those listed below have in common is that they have used a jurisdiction which provides them with secrecy. This list is compiled from ICIJ data in the interests of accountability and transparency: any inaccuracies will be corrected promptly if brought to our attention.

Related Articles:
1. £13tn: hoard hidden from taxman by global elite

The middle class loves the welfare state – but the poor hate it, Why?

By Brendan O'Neill in The Telegraph Politics Last updated: April 2nd, 2013

Comfortably off liberals are always bemused to discover that the working classes and poor do not share their love of the welfare state. Where impeccably middle-class students will bravely spend bitterly cold evenings defending NHS hospitals threatened with closure, and highly paid columnists will devote an entire afternoon to writing tear-drenched articles about the beggary the poor will be plunged into if they lose their benefits, the less well off themselves are decidedly sniffy about the welfare state. Some even seem to hate it. According to recent opinion polls, 64 per cent of Brits think the benefits system "doesn't work"; 78 per cent think that if an unemployed person turns down a job, his benefits should be trimmed; and 84 per cent believe there should be tougher work-capability tests for disabled people. Apparently such views are more entrenched among the poor than among the comfortable.

From these findings, we might deduce that many of the unmoneyed will have given an approving nod to the changes made to the welfare system by Iain Duncan Smith yesterday. And this drives pro-welfare writers and activists absolutely nuts. Why, they wail, are those on the breadline so down about glorious postwar welfarism? In yesterday's Guardian, a columnist did some very public handwringing over the weird fact that anti-welfare "noise" always gets louder "as you head into the most disadvantaged parts of society". This echoes a recent Guardian editorial which bemoaned the way ordinary Brits have become "more Scrooge-like" towards welfare claimants. Or behold the poor, bamboozled Joseph Rowntree researcher who was horrified to discover recently that the less well-off are not "pro-welfare".

Pity the poor, unthanked middle-class warrior for welfare rights! Why is it always his kind alone that must attend demos defending jobseekers' allowance while the fat, fickle jobseekers themselves stay at home, probably watching Jeremy Kyle? Why is it always left to the well-educated activist to adorn her Twitter page with banners saying "I heart the NHS" while the poorest beneficiaries of the NHS fill their Twitterfeeds with tripe about Kim Kardashian's baby bump? These unloved fighters for the right of poor folk to receive money and comfort from the state have come up with all sorts of theories to explain the poor's failure to get off their lardy derrières and defend welfarism. Their favourite is the idea that poor folk, being a bit dim and all, have been brainwashed by "scrounger"-hating tabloid newspapers. As a result of political-class diktat and media messaging, these dimwits have apparently "internalised a Thatcherite every-man-for-himself mentality".

In truth, the real dimwittery in this debate is among the confused and angry middle-class warriors for welfarism. They have simply failed, and failed miserably, to reckon with one of the iron laws of modern politics – which is that the more reliant you are on the welfare state, the more experience you have of it, the less you love it. And by extension, the further removed you are from the welfare state, the less experience you have of it, then the more you can fantasise about its virtues and grow to love it – or at least to love an imaginary version of it derived from watching Casualty and reading Polly Toynbee columns.

If the less well-off really are more hostile to welfarism than the bien-pensant classes, that's perfectly logical. It's because they know the soul-deadening and community-dividing impact that blanket welfarism can have (Editor's comment - Not Sure if this is true). It's because they know that being sustained by the state is a miserable existence compared with being busy, independent, self-reliant. It's because they know that NHS hospitals, especially in the poorer parts of Britain, are far from the greatest human creations since the pyramids, but rather are soulless institutions in which families are relentlessly hectored about their lifestyle choices and eating habits, and the old are treated like animals. It's because they know that the offering of "incapacity" benefits to the long-term unemployed encourages these people to see themselves as sick rather than as having been let down by society. It's because they know that workless communities propped up by ceaseless welfare-state intervention tend to become ghost towns, bereft of individual initiative and lacking in social solidarity. After all, if an individual's or family's every financial and therapeutic need is being met by faraway faceless bureaucrats, what earthly need is there for them to strike up relationships within their own communities, to get together with others in the pursuit of daily happiness or a better future? Welfarism, by coaxing the poor man into the all-encompassing bosom of the state, alienates him from his neighbour. Who could love such a system, save those cushioned sections of society that are lucky enough never to have been mangled by it?

So, all you well-to-do campaigners for the protection or expansion of the welfare state, there is no need to be bemused by the poor's indifference to your battle. For what you love about welfarism – that it insulates the so-called "vulnerable" from the chaotic, often unfair world of the market and struggle and work – is precisely what the poor hate about it (Editor's comment - Am not sure of this conclusion about the poor).

Communism, welfare state – what's the next big idea?

Any attempt to challenge the elite needs courage, inspiration and a truly ground breaking proposal. Here are two to set us off

• 
• • George Monbiot
  • The Guardian, Monday 1 April 2013 20.30 BST

Maria Bgor and her daughter wait for emergency food supplies at the Mosaic church food bank in Hillfields, Coventry. Photograph: Christopher Thomond for the Guardian

Most of the world's people are decent, honest and kind. Most of those who dominate us are inveterate bastards. This is the conclusion I've reached after many years of journalism. Writing on Black Monday, as the British government's full-spectrum attack on the lives of the poor commences, the thought keeps returning to me.

"With a most inhuman cruelty, they who have put out the people's eyes reproach them of their blindness." This government, whose mismanagement of the economy has forced so many into the arms of the state, blames the sick, the unemployed, the underpaid for a crisis caused by the feral elite – and punishes them accordingly. Most of those affected by the bedroom tax, introduced today, are disabled. Thousands will be driven from their homes, and many more pushed towards destitution. Relief for the poor from council tax will be clipped; legal aid for civil cases cut off. Yet at the end of this week those making more than £150,000 a year will have their income tax cut.

Two days later, benefit payments for the poorest will be cut in real terms. A week after that, thousands of families who live in towns and boroughs where property prices are high will be forced out of their homes by the total benefits cap. What we are witnessing is raw economic warfare by the rich against the poor.

So the age-old question comes knocking: why does the decent majority allow itself to be governed by a brutal, antisocial minority? Part of the reason is that the minority controls the story. As John Harris explained in the Guardian, large numbers (including many who depend on it) have been persuaded that most recipients of social security are feckless, profligate fraudsters. Despite everything that has happened over the last two years, Rupert Murdoch, Lord Rothermere and the other media barons still seem to be running the country. Their relentless propaganda, using exceptional and shocking cases to characterise an entire social class, remains highly effective. Divide and rule is as potent as it has ever been.

But I've come to believe that there's also something deeper at work: that most of the world's people live with the legacy of slavery. Even in a nominal democracy like the United Kingdom, most people were more or less in bondage until little more than a century ago: on near-starvation wages, fired at will, threatened with extreme punishment if they dissented, forbidden to vote. They lived in great and justified fear of authority, and the fear has persisted, passed down across the five or six generations that separate us and reinforced now by renewed insecurity, snowballing inequality, partisan policing.

Any movement that seeks to challenge the power of the elite needs to ask itself what it takes to shake people out of this state. And the answer seems inescapable – hope. Those who govern on behalf of billionaires are threatened only when confronted by the power of a transformative idea.

A century and more ago the idea was communism. Even in the form in which Marx and Engels presented it, its problems are evident: the simplistic binary system into which they tried to force society; their brutal dismissal of anyone who did not fit this dialectic ("social scum", "bribed tool[s] of reactionary intrigue"); their reinvention of Plato's guardian-philosophers, who would "represent and take care of the future" of the proletariat; the unprecedented power over human life they granted to the state; the millenarian myth of a final resolution to the struggle for power. But their promise of another world electrified people who had, until then, believed that there was no alternative.

Seventy years ago, in the UK, the transformative idea was freedom from want and fear through the creation of a social security system and a National Health Service. It swept a Labour government to power which was able, despite far tougher economic circumstances than today's, to create a fair society from a smashed, divided nation. This is the achievement which – through a series of sudden, spectacular and unmandated strikes – Cameron's government is now demolishing.

So where do we look for the idea that can make hope more powerful than fear? Not to the Labour party. If Ed Miliband cannot bring himself even to oppose a bill which retrospectively denies compensation to cheated jobseekers, the most we can expect from him is a low-alcohol conservatism of the kind that doused all aspiration under Tony Blair.

Last week I ran a small online poll, asking people to nominate inspiring, transfiguring ideas. The two mentioned most often were land value taxation and a basic income. As it happens, both are championed by the Green party. On this and other measures, its policies are by a long way more progressive than Labour's.

I discussed land value taxation in a recent column. A basic income (also known as a citizen's income) gives everyone, rich and poor, without means-testing or conditions, a guaranteed sum every week. It replaces some but not all benefits (there would, for instance, be extra payments for pensioners and people with disabilities). It banishes the fear and insecurity now stalking the poorer half of the population. Economic survival becomes a right, not a privilege.

A basic income removes the stigma of benefits while also breaking open what politicians call the welfare trap. Because taking work would not reduce your entitlement to social security, there would be no disincentive to find a job – all the money you earn is extra income. The poor are not forced by desperation into the arms of unscrupulous employers: people will work if conditions are good and pay fair, but will refuse to be treated like mules. It redresses the wild imbalance in bargaining power that the current system exacerbates. It could do more than any other measure to dislodge the emotional legacy of serfdom. It would be financed by progressive taxation – in fact it meshes well with land value tax.

These ideas require courage: the courage to confront the government, the opposition, the plutocrats, the media, the suspicions of a wary electorate. But without proposals on this scale, progressive politics is dead. They strike that precious spark, so seldom kindled in this age of triangulation and timidity – the spark of hope.

10 lies we're told about welfare

Has someone made Jim Royle a policy adviser? Millions are being made poorer while we're fobbed off with porkies

• 
• • Ricky Tomlinson
  • guardian.co.uk, Tuesday 2 April 2013 14.47 BST

Protesters against the proposed 'bedroom tax' gather outside Downing Street in London. Photograph: Matthew Lloyd/Getty Images

Welfare reform, my arse. Has Jim Royle parked his chair, feet up, telly on, in the corridors between the Treasury and the Department for Work and Pensions? Employing him as adviser can be the only explanation for the utter rubbish that boils forth from this government on welfare.

Who else could have dreamed up the bedroom tax, a policy so stupid it forces people to leave their homes and drag themselves around the country in search of nonexistent one-bedroom flats?

That one has to be the result of too many hours in front of Jeremy Kyle (no offence) with the heating on full and a can of super-strength lager. It seems as if that is how this government views ordinary people: feckless and useless – poor, because they brought it on themselves, deliberately.

Maybe the cabinet is confused. Twenty-three millionaires in the one room can get like that. But do you know what, enough. Let's call this government's welfare policy what it is – wrong, nasty and dishonest.

Off the top of my head, I can list 10 porkies they are spinning to justify the latest stage of their attack on our 70-year-old welfare state.

1. Benefits are too generous

Really? Could you live on £53 a week as Iain Duncan Smith is claiming he could if he had to? Then imagine handing back 14% of this because the government deems you have a "spare room". Could you find the money to pay towards council tax and still afford to eat at the end of the week?

2. Benefits are going up

They're not. A 1% "uprating" cap is really a cut. Inflation is at least 2.7% . Essentials like food, fuel and transport are all up by at least that, in many cases far more. Benefits are quickly falling behind the cost of living.

3. Jobs are out there, if people look

Where? Unemployment rose last month and is at 2.5 million, with one million youngsters out of work. When Costa Coffee advertised eight jobs, 1,701 applied.

4. The bedroom tax won't hit army families or foster carers

Yes it will. Perhaps most cruel of all, the tax will not apply to foster families who look after one kid. If you foster siblings, then tough. But these kids are often the hardest to place. Thanks to George Osborne and IDS, their chances just got worse. And even if your son or daughter is in barracks in Afghanistan, then don't expect peace of mind as the government still has to come clean on plans for their bedroom.

5. Social tenants can downsize

Really, where? Councils sold their properties – and Osborne wants them to sell what's left. Housing associations built for families. In Hull, there are 5,500 people told to chase 70 one-bedroom properties.

6. Housing benefit is the problem

In fact it's rental costs. Private rents shot up by an average of £300 last year. No wonder 5 million people need housing benefits, but they don't keep a penny. It all goes to landlords. 

7. Claimants are pulling a fast one

No. Less than 1% of the welfare budget is lost to fraud. But tax avoidance and evasion is estimated to run to £120bn.

8. It's those teenage single mums

An easy target. Yet only 2% of single mums are teenagers. And most single mums, at least 59%, work.

9. We're doing this for the next generation

No you're not. The government's admitted at least 200,000 more children will be pushed deeper into poverty because of the welfare changes.

10. Welfare reforms are just about benefit cuts

Wrong. The attack on our welfare state is hitting a whole range of services – privatising the NHS, winding up legal aid for people in debt and closing SureStart centres and libraries. All this will make life poorer for every community.

Some call these myths. I call them lies. We are being told lies about who caused this crisis and lied to about the best way out of it. But I know one thing to be true: this government's polices will make millions of people poorer and more afraid. To do that when you do not have to, when there are other options, is obscene. That's why I'm backing union Unite'sOurWelfareWorks campaign in its efforts to help highlight the truth about our welfare state.

Cricket: Umpiring Decisions should be based on Facts not Opinions

Girish Menon

Should match officials base their decisions on facts or opinions? In football a referee is not required to declare a goal based purely on his opinion. However in cricket an umpire could end a batsman's tenure at the crease based on a conjecture of what would have been if the ball had not been illegally impeded by the batsman. Yes I refer to the LBW decision, an odd method of dismissing a batsman that relies entirely on the forecasting ability of the umpire or the more modern DRS technology.

In football if a defender stops the ball's progress towards the goal using his hands the referee does not have to adjudicate on what would have happened to the ball if the defender had not stopped it illegally. The errant footballer maybe punished with a red card and a penalty given to the opposite side but a goal is never declared. In other words at no time is a referee asked to base his decision on what would have been if the footballer had not stopped the ball with his hands.

A batsman illegally impeding a cricket ball is cricket's equivalent of a handball. However unlike football a cricket umpire can award a 'goal' to the opposing side for this 'foul' by the batsman. i.e. he can declare a batsman out lbw for illegally impeding the ball.

 It is this writer's opinion that all umpiring decisions should be based on facts and not opinions. The LBW decision, with or without DRS technology, can at best be only called an opinion or a value judgement. And the problem with opinions is that they may not be shared by everyone. Currently an LBW decision involves the human umpire or DRS to forecast what would have happened if the ball had not been illegally impeded. Since, 'forecasting is difficult, especially about the future' would cricket not be better off if it based its decisions on facts instead of opinions?

As for the 'cheat', the batsman who deliberately impedes a ball's progress illegally, one can find other methods of punishing him and his team. But declaring a 'goal' based on opinion should not be the way forward for a modern game.

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Novartis loses landmark patent case in India

India’s Supreme Court dealt a significant blow to Western drugs firms on Monday when it rejected an application by the Swiss pharmaceutical company Novartis to patent an anti-cancer drug.

Until recently patent and intellectual property disputes have been limited to HIV drugs as campaigners have accused Western firms of profiteering while poor patients in developing countries die. The Novartis ruling however marks a widening of the conflict to other proprietory drugs. Photo: Alamy

By Dean Nelson, in New Delhi

1:51PM BST 01 Apr 2013

22 Comments

The company said the decision raised serious, wider implications for the industry and reflected India’s ‘growing non-recognition’ of intellectual property.

Its ruling, however, was hailed by campaigners and Indian pharmaceutical firms as a victory for the country’s poor who cannot afford expensive Western medicines. Indian drug firms sell generic versions of Western drugs for up to one tenth of the price.

India’s trade minister Anand Sharma yesterday hailed the decision as an “historic judgment” which reinforced Indian laws preventing companies from extending patent protection unfairly by minor tweaks to their products, a process known in India as ‘ever-greening. Y.K Hamied, chairman of Cipla, one of India’s largest generic drugs companies, said the ruling will “pave the way for affordable medicines in India.”

Novartis however yesterday warned the ruling will discourage expensive investment in new drug treatments. The decision “provides clarification on Indian patent law and discourages innovative drug discovery essential to advancing medical science for patient," it said in a statement.

“The primary concern of this case was with India's growing non-recognition of intellectual property rights that sustain research and development for innovative medicines. As a leader in both innovative and generic medicines, Novartis strongly supports the contribution of generics to improving public health once drug patents expire,” it added.

The company had applied for a patent for a new tablet version of its anti-cancer drug Glivec, which had taken years to develop, it said. The Supreme Court however ruled that the tablet did not amount to an advance sufficient to merit a patent. Around 16,000 Indian cancer patients use Novartis' Glivec - 95 per cent free of charge, the company said, while an estimated 300,000 use cheaper Indfan versions.

Until recently patent and intellectual property disputes have been limited to HIV drugs as campaigners have accused Western firms of profiteering while poor patients in developing countries die.

The Novartis ruling however marks a widening of the conflict to other proprietory drugs. Merck, the US-based drugs company is facing a dispute with the Indian pharmaceutical firm Glenmark which has launched a generic version of its diabetes drug Januvia which is almost a third cheaper.

“It's all about interpretation of section 3(d) of the Indian Patent Act,” said Ran Chakrabarti, a commercial lawyer based in New Delhi.

“Essentially, it says that you can't tweak something that already exists and then patent it, if it doesn't enhance the known efficacy of that thing, or result in a new product. No doubt lawyers will have spent a lot of time pouring over the meaning of 'enhance', 'efficacy' and 'new product', but it looks as if the Supreme Court has ruled that this is old wine in a new bottle.

"Drug companies are going to have to come up with something pretty unique to get patent protection, and while that's good news for consumers, it pushes the threshold for innovation northwards,” he added.

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A Just Order

Editorial in The Hindu

The Supreme Court order rejecting a plea to grant patent protection for Glivec, a cancer-fighting drug from Novartis, is a landmark. It will greatly strengthen the quest for access to affordable medicines in India. The decision affirms the idea that a patent regime loses its social relevance when a drug is priced beyond the reach of the vast majority of a country’s people. That pharmaceutical companies employ high pricing to limit the number of beneficiaries of “blockbuster” patented molecules and even older “evergreened” medicines is an irony, because making additional copies of a drug is not expensive. On the other hand, cost control and dispensing of essential medications in government-run health facilities is affected, because many States have no centralised procurement system. It is unsurprising, therefore, that less than 10 per cent of medicines sold in India are under patent, while the vast majority are branded generics. The court order should prompt producers of patented drugs to move towards liberal licensing and low cost manufacture in India, the pharmacy of the South that produces Rs.100,000 crore worth of medicines annually and sells nearly two thirds within the country. It is a matter of concern that at least a dozen pharmaceutical innovations used in the treatment of cancer, HIV/AIDS, and Hepatitis B and C are not affordable to even the upper middle classes, and impossible to access for the poor.

It would be a gross distortion to paint the Glivec order, which follows the compulsory licensing of Bayer’s drug Nexavar, as an innovation killer. There is evidence to show that major pharma companies recover more than the cost of innovation of a drug in a single year from the United States market alone. Moreover, the costing done by industry has come in for criticism from scientists and policymakers on the grounds that the bloated, irrelevant investments of recent decades are used as the baseline to make calculations. It should not, as the industry claims, cost a billion dollars (and take a dozen years) to produce a new drug; the informed estimate is a third of that figure. The contested field of drug discovery now calls for greater scrutiny of costs and therapeutic value, and control of prices through various legal avenues available under the Indian Patents Act and the Trade-Related Aspects of Intellectual Property Rights as confirmed by the Doha Declaration. It would naturally strengthen the case for grant of patents and consensus pricing, if the industry opens its books for verification. Until the golden mean is reached, governments with vast populations that are denied access to medicines due to economic reasons can justifiably use unilateral price control mechanisms.

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Calling big pharma’s bluff

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DWIJEN RANGNEKAR in the hindu

   

 

The lesson from the Supreme Court ruling on Gleevec is that pharmaceutical multinational corporations need to focus research on genuine innovations rather than on ways to evergreen their patents

The much awaited Supreme Court judgment on Gleevec has been delivered. Novartis has failed in reversing the rejection of its patent. And, predictably — like a scratched record — there have been suggestions that pharma investments in India will dry up and take flight to China. At each twist of this case, Novartis has produced such bluster. We need to pay attention to the judgment as it is a nuanced handling of difficult questions concerning a hastily drafted section — Section 3(d) of the Indian Patents Act, which allows new forms of existing drug formulations to be patented only if they result in increased efficacy. The judgment adopts a gentle caution in parsing out Section 3(d); yet, it is firm in reading 3(d) as a “second tier of qualifying standards” for patentability. Further, the judgment also stands out by reprimanding the “artful drafting” of patent applications adopted by big pharma.

CHRONOLOGY

To begin, it is useful to draw out some of the chronology concerning Gleevec that the judgment reveals. The story of the patent begins with Jurg Zimmerman’s invention of derivatives of N-phenyl-2- pyrimidine-amine, one of which in freebase form was called “Imatinib,” and together constituted a U.S. patent application (no. 5,521,184) granted on May 28, 1996 (which, the judgment terms “the Zimmermann Patent”). Subsequently, a European patent was also acquired. Later, a patent application was filed for the beta crystalline form of Imatinib Mesylate (the subject in dispute) in January 2000. Initially rejected, the patent was awarded in May 2005 following Novartis’s appeal to a U.S. appellate court. What is interesting is that the filings for new drug approval, submitted in April 1998, was for Gleevec, and a filing for original drug approval in February 2001 was for Imatinib Mesylate. Confusing as this may seem, the judgment highlights this to establish that Imatinib Mesylate was covered by the Zimmerman patent and that Gleevec was its market name. Any remaining doubt, the judgment notes, is extinguished by the application for patent term extension: “This application leaves no room for doubt that Imatinib Mesylate, marketed under the name Gleevec, was submitted for drug approval as covered by the Zimmermann patent.”

CONTEXT

One of the useful aspects of the judgment is in distilling the significance of “context” in giving meaning to statute. Early on, it notes that to understand the import of the various amendments introduced in the third amendment to the Patent Act, 1970 — to come into full compliance with TRIPS — it is “necessary to find out the concerns of Parliament … What was the mischief Parliament wanted to check and what were the objects it intended to achieve through these amendments?” In this respect, the judgment recalls not only the heated Parliamentary debate, but also the concerns of public health practitioners the world over, and of public statements and petitions from U.N. agencies and civil society organisations. With India being the leading global supplier of bulk drugs, formulations and generic Antiretrovirals (ARV), the global concerns layered domestic worries about affordability of drugs.

Evidence in a widely cited study by the National Institute of Health Care Management, Changing Patterns of Pharmaceutical Innovation, is telling. Between 1989 and 2000, the U.S. Food and Drug Authority approved 1,035 new drug applications — of these, 65 per cent contained active ingredients that were already on the market (i.e. incrementally modified drugs), 11 per cent were identical and only 15 per cent were considered a “highly innovative drug.” Mischief like this results in a patent thicket around a single molecule to delay generic entry which Section 3(d) seeks to avoid. Consequently, the Supreme Court heralds Section 3(d) as a “second tier of qualifying standards for chemical substances/pharmaceutical products in order to leave the door open for true and genuine inventions but, at the same time, to check any attempt at repetitive patenting or extension of the patent term on spurious grounds.”

The significance of this rendering of Section 3(d) is borne out in the Supreme Court’s mix of caution in parsing out the section and firm pronouncements on patent drafting. Section 3(d) states, the mere discovery of a new form of a known substance which does not result in the enhancement of the known efficacy of that substance or the mere discovery of any new property or new use for a known substance or of the mere use of a known process, machine or apparatus unless such process results in a new product or employs at least one new reactant.

And, has the following explanation appended: For the purposes of this clause, salts, esters, ethers, polymorphs, metabolites, pure form, particle size, isomers, mixtures of isomers, complexes, combinations and other derivatives of known substance shall be considered to be the same substance, unless they differ significantly in properties with regard to efficacy.

MADRAS HC READING

Recall that the Madras High Court’s reading that efficacy is a pharmacological idea associated with the ability of a drug to produce a desired therapeutic effect independent of potency, i.e. “healing of disease.” And, the Intellectual Property Appellate Board (IPAB) had noted with respect to enhanced efficacy that “it is not possible to quantify this term by any general formula” and that an assessment would “vary from case to case.” In revisiting these readings, the Supreme Court also had the views of Shamnad Basheer (as an intervenor-cum-amicus) and Anand Grover (Counsel for Cancer Patients Aid Association). The latter had argued for a strict reading of 3(d) which would see efficacy entirely in pharmacological terms. While Basheer agreed that all advantageous properties may not qualify under 3(d), he held that increased safety and reduced toxicity should be seen favourably. Even as the Supreme Court recalls the concerns that author 3(d) — thus, urging a “strict and narrow reading” for medicines — it prefers to delay definitive pronouncement and allow for jurisprudence to develop on this matter. Yet, it is firm in noting that enhancements in the “physical properties” of a product would render a patent application foul of 3(d).

It is here that the evidence — either in the patent applications or submitted later through affidavits to Controller were found wanting in establishing enhanced efficacy. Take for instance the “Massimini” affidavit, filed before the Controller and directed at 3(d), where two points emanate. First, that the beta crystalline form of Imatinib Mesylate is highly soluble, and second that it demonstrates a number of improved physical properties (e.g. flow properties, thermodynamic stability). Yet, in probing, it becomes clear that the comparison is to Imatinib — and not Imatinib Mesylate, where the latter is the “known substance” in terms of 3(d). Which leaves the issue of increased bioavailability — and here the court finds “there is absolutely nothing on this score apart from the adroit submissions of the counsel” and dismisses the argument.

ON DRAFTING

A final aspect of the judgment that needs highlighting is the pronouncement concerning drafting. The careful interrogation of the sequence of events leading to the patent application for the beta crystalline form of Imatinib Mesylate opened up gaping holes in the claims made by Novartis. These included that Gleevec was “‘disclosed” in the Zimmerman patent and this point is also implied by Novartis’s legal notice to NATCO in the U.K. to stop production of its generic version, VEENAT. In response, Novartis argued that even while Gleevec could be claimed by the Zimmerman patent, it was not fully disclosed in an enabling manner. Thus, seeking to differentiate between claims and disclosure. This wonderful legalese was eloquently rejected by the Supreme Court; both, in terms of U.S. legal history that was cited and in terms of the argument’s merits. And it’s useful to quote at length: “We certainly do not wish the law of patent in this country to develop on lines where there may be a vast gap between the coverage and the disclosure under the patent; where the scope of the patent is determined not on the intrinsic worth of the invention but by the artful drafting of its claims by skilful lawyers, and where patents are traded as a commodity not for production and marketing of the patented products but to search for someone who may be sued for infringement of the patent.”

LAPSES

Looking back over the last several years, it is useful to recall the several lapses committed by Novartis. It failed to heed petitions by health groups and civil society to drop the case. For that matter it failed to also heed the wisdom of its own shareholders who urged it to withdraw the challenge. And at the Supreme Court along with losing the case, we also find that the Gleevec patent application “appears to be a loosely assembled, cut-and-paste job, drawing heavily upon the Zimmermann patent.”

The judgment should be well noted and celebrated. It recalls the context of 3(d) and reminds us of the matters of concern that punctuated its crafting. While the section may have been hastily drafted and insufficiently specified, it has the elements to withstand ever-greening. Pharma companies will always be rewarded for their inventive work and effort — and by drawing in a secondary qualifier, they will have to focus their efforts on genuine inventions rather than overlapping patents.

(Dwijen Rangnekar is Associate Professor of Law at the University of Warwick, U.K. E-mail: d.rangnekar@warwick.ac.uk)